The Woodside Petroleum Limited (ASX: WPL) share price is sliding lower today as investors contemplate the company's $41 billion merger with the petroleum division of BHP Group Ltd (ASX: BHP).
At the time of writing, shares in the oil and gas company are down 3.15% to $19.65.
The continued weakness means shares have now fallen about 6.6% since announcing its intentions to create a global energy company through the merger.
What's moving the Woodside share price?
The Scarborough conundrum
Negative sentiment is winning out on Thursday as the Woodside share price pulls to the downside. It certainly has been an eventful week for shareholders of the oil and gas giant. Not only did it announce its full-year results for FY21, but it also confirmed plans to become a top-10 global player in the energy industry.
Adding to the pile of things to consider, shareholders need to account for another variable in their decision-making. According to reports, the terms of the potential merger have investors somewhat backed into a corner.
To be more precise, some Woodside shareholders are not content with a condition pertaining to the Scarborough Offshore project, which is 375 kilometres west-northwest of the Burrup Peninsula in Western Australia. The terms give BHP the option to sell its 26.5% stake in the gas project to Woodside for US$1 billion in the second half of 2022.
As a result, some shareholders feel as though Woodside may be forced to cough up $1 billion to BHP if the merger doesn't go ahead. A Woodside investor described the situation to the Australian Financial Review as "a bit of a gun to the head".
Meanwhile, chief executive Meg O'Neill put it a little less dramatically, saying "[the option] provides a bit of an out" for BHP.
Indeed, the option adds a whole other layer of complexity when it comes to voting for or against the merger.
Looking ahead
Ms O'Neill has already suggested the company may look to list in London and New York to drum up support from new investors. The CEO also noted while some shareholders will decide to leave the register, they will quickly be replaced with others.
For now, existing shareholders will be mulling over the prospects of the company doubling in size via the BHP merger. That's a decision that will undoubtedly impact the Woodside share price, for better or for worse.
